For most life insurance policies, the insured person is also the owner. When the insured dies, the funds pass outside the estate directly to the named beneficiaries, resulting in no issues with probate. This is one of the important advantages of having life insurance policies.
However, there are some cases where the ownership of a life insurance policy could be subject to probate. If the insured and owner are different—such as when a parent or grandparent pays for and owns a policy on a child or grandchild, who is the insured—then that life insurance policy is like any other asset that the parent or grandparent owns. Upon passing of the policy owner, all assets, including life insurance, can be subject to probate — the process is settling a decedent’s estate. Without preplanning, the new owner will need to be named during the probate process, which can cause unneeded costs, frozen assets, and the loss of time. It can also negate many of the advantages that insurance enjoys.
The solution is quite simple. If you own a policy insuring someone else, we recommend one of two solutions to avoid probate:
- Name a Successor Owner now to allow immediate and automatic transfer upon your death, or
- Consult with a trusted Financial Advisor to set up a Trust to own the policy.
Please contact our Policy Services Team at 1-800-336-4538, M-F, 8:30 a.m.-5:30 p.m. EST to request a Successor Owner Form or download it here. Complete, sign, date and return it to [email protected], or fax it to 1-888-210-4882.